Managing third-party risks is a critical and under-discussed piece of property management, where various vendors, contractors, and tenants interact with a property on a daily basis.
Insurance verification is a crucial element of third-party risk management, aiming to ensure that everyone connected to your property holds adequate insurance coverage to protect it. Without this important measure in place, property managers and landlords open themselves up to various costly claims and liabilities.
By implementing a robust insurance verification process into your operations, you can protect your assets, avoid fines and penalties, and build stronger relationships with both your tenants and business partners. We’ll break it down for you below.
What Is the Insurance Verification Process?
Insurance verification is an important process of validating vendor or tenant coverage. It is essential for minimizing liability and ensuring compliance with legal and contractual obligations, which ultimately protects the people in charge from taking on any of that downstream risk.
It involves a few key steps:
- Requesting proof of insurance. Property managers request certificates of insurance, or COIs, from relevant vendors, contractors, and tenants. Include requests for any specific provisions or endorsements you need here.
- Validating coverage. Next, review that the coverage type(s), coverage limits, policy dates, and additional insured endorsements all meet your property requirements.
- Tracking expiration dates. Monitor expiration dates to ensure policies remain active throughout the course of a job, lease, or business relationship.
- Maintaining records. Finally, keep a centralized record of all insurance documentation for future audits or claims.
Businesses can also rely on modern insurance verification software, which streamlines these steps with features like automating requests, tracking compliance, providing updates on expiring policies, and generating reports on vendor compliance. These tools help lessen the administrative burden on strapped teams and ensure compliance and accuracy across your portfolio.
Whose Responsibility Is it to Verify Insurance Coverage?
In the real estate business, property managers are typically the ones in charge of requesting and reviewing insurance documents, ensuring compliance, and maintaining records. They are the ones with the most to lose when it comes to liabilities, so enacting robust risk management strategies is crucial. Failure to verify coverage or ensure compliance can result in fines, legal issues, or other serious financial losses.
Tenants, on the other hand, are responsible for obtaining and maintaining active renters insurance or liability coverage, depending on their lease requirements. They will work with their insurer to show proof of active coverage to property managers as requested. Similarly, vendors and contractors who work on properties will (or should) be asked to provide evidence of their coverage to start a job.
Additionally, insurance agents play a big role here as the ones who issue the insurance certificates (the only ones certified to do so). Agents or brokers will collaborate with property managers to generate COIs for individuals they insure and address any questions relevant to their coverage.
What to Send for Proof of Renters’ Insurance
Because of the many risks that we’ve mentioned associated with not verifying insurance coverage, providing proof of renters’ insurance is a common requirement for tenants leasing a property. The most common format for sending proof of renters insurance is through a renters’ insurance certificate of insurance, which outlines a policy’s details, including coverage limits, policyholder name, and policy duration.
To obtain a COI, tenants go to their insurance provider (or, in some cases, their insurer’s digital portal), who will issue it for them. They might require some information about the policyholder to generate the document, but the process is fairly simple from there. In some cases, tenants could also send a policy declaration page or “dec page,” which is the first page of a policy that provides a detailed summary of their policy terms, as proof of coverage.
Digital platforms can help simplify the submission process, allowing tenants to upload documents directly to property management systems.
What Is a Certificate of Property Insurance?
A certificate of property insurance is a document that provides proof of coverage for a specific property. This certificate is different from other COIs because it pertains specifically to property-related insurance policies, such as hazard or liability insurance for buildings.
Property managers use certificates of property insurance to verify that their assets are adequately protected against risks like fires, natural disasters, or liability claims. COI tracking for property managers, including obtaining and interpreting certificates, is crucial for maintaining compliance and reducing exposure to financial losses.
Streamline Your Insurance Verification with the Right Tools
Insurance tracking doesn’t stop once you’ve requested a COI. If a tenant canceled their coverage the day after showing you their COI, or if a vendor’s policy expired, you’d have no way of knowing if you weren’t actively staying on top of verification.
myCOI’s certificate management platform validates the COIs that you receive, stores them in one centralized repository for easy viewing, monitors them over time to ensure that you maintain compliance, supports quarterly policy verification, and much, much more. Speed and ease your compliance efforts today with myCOI.